Be it Enacted by the Senate and House of Representatives in General Court convened:

1 New Chapter; Fantasy Contests. Amend RSA by inserting after chapter 287-G the following new chapter:

CHAPTER 287-H

FANTASY CONTESTS

287-H: 1 Definitions. In this section:

I. "Beginner" means a fantasy contest player who has entered fewer than 51 contests offered by a single fantasy contest operator and who does not otherwise meet the definition of highly-experienced player.

II. "Commission" means the New Hampshire lottery commission.

III. "Confidential information" means information related to the play of a fantasy contest by fantasy contest players obtained as a result of or by virtue of a person's employment.

IV. "Entry fee" means cash or cash equivalent that is required to be paid by a fantasy contest player to a fantasy contest operator to participate in a fantasy contest.

V. "Fantasy contest" means a fantasy or simulated game or contest in which one or more players compete against each other and winning outcomes reflect the relative knowledge and skill of the players and are determined predominantly by accumulated statistical results of the performance of individuals, including athletes in the case of sporting events.

VI. "Fantasy contest operator" means a person that offers fantasy contests with an entry fee for a cash prize to the general public.

VII. "Fantasy contest player" means a person who participates in a fantasy contest offered by a fantasy contest operator.

VIII. "Gross fantasy contest revenues" means the amount equal to the total of all entry fees that a fantasy contest operator collects from all fantasy contest players, less the total of all sums paid out as prizes to all fantasy contest players, multiplied by the resident percentage for New Hampshire.

IX. "Highly experienced player" means a person who has either:

(a) Entered more than 1,000 fantasy contests offered by a single fantasy contest operator; or

(b) Won prizes totaling $1,000 or more in more than 3 fantasy contest offered by a single fantasy contest operator.

X. "Residence percentage" means, for each fantasy contest, the percentage, rounded to the nearest tenth of a percent, of the total of entry fees collected from fantasy contest players located in New Hampshire, divided by the total entry fees collected from all fantasy contest players in fantasy contests.

XI. "Script" means a list of commands that a computer program can execute to automate processes with respect to a fantasy contest.

287-H:2 Registration with the Commission.

I. No fantasy contest operator shall offer any fantasy contests with an entry fee in this state without first being registered with the commission. However, a fantasy contest operator that offered fantasy contests in this state prior to the effective date of this chapter may continue to offer fantasy contests with an entry fee in this state, provided such operator files an application for registration with the commission within 60 days of the application's availability, and may continue to offer fantasy contests until such application for registration has been approved or denied.

II. Before obtaining a registration to offer fantasy contests in this state, a fantasy contest operator shall:

(a) Be authorized to transact business in this state; and

(b) Pay to the commission the annual fee of $5,000 or 10 percent of the applicant's gross fantasy contest revenue from the previous calendar year, whichever is lower.

III. On the anniversary date of the payment made under this section, a fantasy contest operator shall pay to the commission an annual registration renewal fee in an amount determined in accordance with subparagraph II(b).

IV. In addition to the registration fee, a fantasy contest operator shall annually pay to the commission a tax of 5 percent of the fantasy contest operator's gross fantasy contest revenues for the preceding 12 months of registration.

V. The commission shall adopt rules under RSA 541-A implementing the provisions in this chapter, which shall include the adoption of an application form for registration. The commission shall not adopt rules limiting or regulating:

(a) The administration or results of an individual game or contest;

(b) The statistical makeup of a game or contest; or

(c) The digital platform of a fantasy contest operator.

287-H:3 Consumer Protection.

I. As a condition of registration, a fantasy contest operator shall submit evidence satisfactory to the commission that the operator has established and shall implement commercially reasonable procedures for fantasy contests with an entry fee that:

(a) Prevent employees of the fantasy contest operator, and relatives living in the same household as such employees, from competing in any fantasy contest offered by any fantasy contest operator in which the operator offers a cash prize to the general public;

(b) Prevent sharing of confidential information that could affect such fantasy contest play with third parties until the information is made publicly available;

(c) Prevent the fantasy contest operator from participating in such fantasy contest he or she offers;

(d) Provide that no winning outcome is based on the score, point spread, or any performance of any single actual sports team or combination of such teams or solely on any single performance of an individual athlete or participant in any single actual sporting event;

(e) Prohibit the following persons from participating in any fantasy contest:

(1) Athletes and individuals who participate or officiate in a game or competition that is the subject of the fantasy contest;

(2) Any sports agent, team employee, referee, or league official associated with a sport or athletic event that is the subject of the fantasy contest.

(f) Verify that a fantasy contest player in such a fantasy contest is 18 years of age or older;

(i) Provide fantasy contest players with access to the fantasy contest player's play history and account details;

(j) Allow individuals to restrict themselves from entering such a fantasy contest upon request and provide reasonable steps to prevent the person from entering such fantasy contests offered by the fantasy contest operator;

(k) Disclose the number of entries that a fantasy contest player may submit to each such fantasy contest and provide reasonable steps to prevent players from submitting more than the allowable number; and

(l) Take reasonable steps to not advertise or run promotional activities at elementary or secondary schools or on college campuses.

II. The information required to be submitted pursuant to paragraph I shall be exempt from disclosure pursuant to RSA 91-A:5, IV.

III. A fantasy contest operator shall not offer fantasy contests based on the performances of participants in collegiate, high school, or youth athletic events.

IV. A fantasy contest operator offering fantasy contests with an entry fee in this state shall contract with a third party to annually perform an independent audit, consistent with the standards established by the Public Company Accounting Oversight Board, to ensure compliance with this section and submit the results of such audit to the commission.

V. A fantasy contest operator shall not offer a fantasy contest to the general public that does not establish and make known all prizes and awards offered to winning participants in advance of the game or contest.

VI. A fantasy contest operator offering fantasy contests with an entry fee in this state shall not target minors or individuals who have requested a restriction pursuant to paragraph I(j) any advertising.

VII. A fantasy contest operator offering fantasy contests with an entry fee in this state shall:

(a) Prohibit the use of scripts in fantasy contests that gives any fantasy contest player an unfair advantage over other fantasy contest players;

(b) Monitor fantasy contests to detect the use of unauthorized scripts and restrict fantasy contest players found to have used such scripts from participation in further fantasy contests;

(c) Make all authorized scripts readily available to all fantasy contest players; provided, that a licensed operator shall clearly and conspicuously publish its rules on what types of scripts may be authorized in a fantasy contest.

VIII. Funds in fantasy contest operator consumer accounts shall be:

(a) Held in trust for the consumer in a segregated account, in which case the fantasy contest operator shall segregate fantasy contest player funds from operational funds or maintain a reserve that exceeds the amount of player funds on deposit, which reserve may not be used for operational activities. These reserve funds may take the form of cash, cash equivalents, payment processor reserves, payment processor receivables, an irrevocable letter of credit, a bond, or a combination thereof, in the amount that must exceed the total balances of the fantasy contest players' accounts; or

(b) Held in a special purpose account that is maintained and controlled by a properly constituted corporate entity that is not the fantasy contest operator and whose governing board includes one or more corporate directors who are independent of the fantasy contest operator and of any corporation related to or controlled by the fantasy contest operator. Said corporate entity must require a unanimous vote of all corporate directors to file bankruptcy and must have articles of incorporation that prohibit commingling of funds with those of the fantasy contest operator except as necessary to reconcile the accounts of fantasy contest players with sums owed by those fantasy contest players to the fantasy contest operator. Said special purpose corporate entity shall also be:

(1) Restricted from incurring debt other than to fantasy contest players pursuant to the rules that govern their accounts with fantasy contest operators;

(2) Restricted from taking on obligations of the fantasy contest operator other than obligations to fantasy contest players pursuant to the rules that govern their accounts with fantasy contest operators; and

(3) Prohibited from dissolving, merging or consolidating with another company (other than a special purpose corporate entity established by another fantasy contest operator that meets the requirements of this section) while there are unsatisfied obligations to fantasy contest players.

IX. Fantasy contest operators shall clearly and conspicuously identify highly experienced players in fantasy contests by a symbol attached to a player's username, or by other easily visible means. Fantasy contest operators shall offer some fantasy contests that are open exclusively to beginner players and that exclude highly experienced players.

287-H:4 Penalty. Any person who violates this chapter is subject to a civil penalty of not more than $1,000 for each violation, not to exceed $5,000 for violations arising out of the same transaction or occurrence, which shall accrue to the state and may be recovered in a civil action brought by the commission.

287-H:5 Authorization of Fantasy Contests. Notwithstanding any law to the contrary, upon adoption of this section the conduct of fantasy contests shall be authorized in accordance with the provisions of this section.

287-H:6 Exemptions. Fantasy contests with or without an entry fee, conducted in accordance with this chapter, are exempt from RSA 647 and RSA 338.

287-H:7 Applicability of RSA 358-A. Nothing contained in this section shall be construed as limiting the applicability of RSA 358-A to fantasy contest operators.

2 New Paragraph; Business Profits Tax Credit for Fantasy Contest. Amend RSA 77-A:5 by adding after XV a new paragraph XVI as follows:

XVI. Taxes paid pursuant to RSA 287-H:2, IV.

3 New paragraph; Business Enterprise Tax Credit for Fantasy Contest. Amend RSA 77-E be inserting after section 3-d the following:

77-E:3-e Credit for Fantasy Contests. Taxes paid pursuant to RSA 287-H:2, IV shall be allowed as a credit against tax due under this chapter.

4 Effective Date. This act shall take effect 60 days after its passage.

This bill regulates online fantasy sports contests by requiring fantasy contest operators to register and pay an annual fee up to $5,000 to operate within the State as well as pay an annual tax of five percent on gross fantasy contest revenues which may be credited against the business profit tax and business enterprise tax. Fantasy operators not in compliance with legislation would be subject to civil penalties of $1,000 per each violation not to exceed $5,000 if arising from the same transaction. The Lottery Commission states it does not have empirical data to estimate increased revenues from registration fees, taxes, and penalties, and anticipates increased expenditures for regulation purposes. Lottery and charitable gaming revenue is credited to the lottery fund, with net revenues after Lottery Commission expenditures being credited to the state education trust fund. The Department of Revenue Administration states it does not have adequate information to determine the impact legislation would have on the business profit tax or business enterprise tax.